Court orders major insurer to cancel its plan to abolish field salesperson system

March 27, 2007

The Tokyo District Court on March 26 ordered Tokio Marine & Nichido Fire Insurance Co. Ltd., Japan’s largest non-life insurance company, to cancel its plan to abolish the field salesperson system in July, because this plan lacks legitimacy.

Forty-six plaintiffs demanded that the company retract the plan, arguing that the abolition of the field salesperson system would amount to their dismissals.

Pointing out that the company plan would bring about a drastic fall in field salespersons’ incomes and that the planned personnel transfers will force many of them to change residences and put those workers at a serious disadvantage, the court judged that the plan is not justifiable. The court confirmed that these workers will maintain their status as the company’s field salespersons after July.

In October 2005, Tokio Marine & Nichido announced the plan to abolish all 921 field sales positions that were engaged in selling insurance on the grounds of unprofitability. The company forced these workers to choose between quitting the company to become insurance sales agencies under the exclusive contract or accepting personnel transfers, in most cases, to existing agencies.

If a field sales employee becomes an insurance agency yearly income would decrease by 31 percent on average, about 2.7 million yen per worker, even if they achieve the same results as they currently do. Working for an existing insurance agency will require them to increase sales by 50 percent in order to maintain their current income level.

At a news conference held after the court decision, the plaintiffs’ legal team emphasized the significance of the ruling that ordered a major company to withdraw its restructuring plan before it was implemented.

The All Japan Non-Life Insurance Labor Union issued a statement stating, “The court ruling has made clear that even the leading insurance company is not allowed to impose an arbitrary policy of cutting off workers in order to yield more profit. We demand that the company give up the plan to abolish the system and take a course of fully settling the dispute.”